CTT Systems: Solid Q2, 36% org growth and 40% margins - ABG

EBIT SEK 24m vs. ABGSCe 15m, 40% margins FactSet 2022e EBIT to come up by 1-3%, excl. FX Solid, despite slower than expected Q3 ramp-up Q2 details

Strong growth, mainly driven by a continued good recovery in aftermarket (AM) revenues as well as significant FX support. CTT delivered sales of SEK 58m (+13% vs. ABGSCe 52m), +19 % q-o-q and +36% y-o-y organically (ABGSCe 32%), driven by 65% growth in AM revenues and slightly better VIP/private jet sales. EBIT reached SEK 24m (+60% vs. ABGSCe 15m), >250% y-o-y, for a margin of 40% (ABGSCe 28%, 18% in Q2’21) as aftermarket revenues accounted for 69% of sales (ABGSCe 66%). Run-rate AM revenues are now ~10% above 2019 levels. For Q3, CTT guides for revenues of SEK 58-63m (up 44-57% y-o-y, mid-point 7% below vs. ABGSCe 65m), with ”no big changes in segment sales”. In addition, the CEO states that CTT is on track to re-establish conditions for OEM growth while the potential in Private Jets remains high. However, a deterioration in macro-economic conditions could negatively impact travel demand, according to the CEO. FCF was close to zero in the quarter, due to a build-up in receivables.

Estimate changes We believe FactSet consensus 2022e EBIT could come up by 1-3%, excluding updated FX, as the strong Q2 report will partly offset potentially lower sequential growth in Q3 and Q4 compared to the start of the year.

Final thoughts, valuation at 27-14x EV/EBIT ‘22e-‘24e We expect a small initial positive reaction on the day following a solid report, even when excluding the significant FX boost and the fact that the Q3 guidance implies a sales ramp-up below our current expectations. The stock has held up well YTD (-7% vs. OMXSGI -24%) but has underperformed into numbers (-2% vs. OMXSGI +5% L1M) and is trading at (pre-Q2) 27-14x EV/EBIT ‘22e-‘24e. There is a conference call at 09:30 CET, link: https://tv.streamfabriken.com/ctt-systems-q2-2022.

Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ctt-systems/Equity-research/2022/7/ctt-systems---solid-q2-36-org-growth-and-40-margins/